Tag: return calculations
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Arbitrage pricing theory (APT)
Arbitrage pricing theory (APT) is an asset pricing model developed by the American economist Stephen Ross in the mid-1970s. While the capital asset pricing model (CAPM) posits a single systematic risk factor, which is the market risk, arbitrage pricing theory accommodates multiple risk factors. As such, APT has been the driving force behind the growth of multi-factor…
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Portfolio return calculator and formula
In this lesson, we’ll teach you how to compute the return of a portfolio that consists of multiple assets. We offer a portfolio return calculator as well. Portfolio return calculator You can use the portfolio return calculator below to compute the returns of portfolios containing up to 5 stocks. Please note: Portfolio return formula So…
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Expected return calculator and formula
We can rely on the historical (or realized) average return when evaluating an asset’s past performance. In that sense, the historical average return is a backward-looking measure. But, to forecast an asset’s future performance, we need a forward-looking measure. This measure is called the expected return. In this lesson, we explain how to compute the…
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Holding period return calculator and formula
When investors buy securities (e.g., stocks), they may hold them for months or years before selling them. The duration during which an investor holds on to a particular security is known as the holding period and the return over that period is referred to as the holding period return. This is typically abbreviated as HPR.…
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Real return vs nominal return
in investmentsIn this lesson, we explain the difference between nominal returns and real returns and demonstrate the impact of inflation on return calculations. You will also learn how to calculate the real rate of return using the nominal rate of return and the inflation rate. How does inflation affect investment returns? Inflation can be loosely defined…
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Return calculations in 3 easy steps
Investing is all about realizing a positive return. But, how do you calculate returns? In this post, we discuss the fundamentals of return calculations. We begin by explaining why investors are interested in calculating returns. Then, we teach you how to calculate gross returns and net returns. We discuss the concept of total return as…
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Plotting stock prices and returns
In this tutorial, we’ll teach you how to plot time series of stock prices and returns using Excel. We’ll explain how to interpret these plots as well. We’ve chosen to examine Microsoft (MSFT) and Kellogg (K) shares for the 30-year period between January 1, 1990 and January 1, 2020. The data is obtained from Yahoo! Finance…
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Downloading stock price data from Yahoo! Finance
In this tutorial, we will teach you how to download historical stock price data from Yahoo! Finance. Yahoo! Finance is a great source for obtaining historical data on financial securities such as stocks, stock market indices (e.g., S&P 500, Dow Jones Industrial Average, FTSE 100), and ETFs. It has global coverage, and the data is free…
